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Not cash burn, but target robust businesses with profitability and cash: Nikesh Arora on start-ups

NEW DELHI: Nikesh Arora is the man who has seen the evolution of the start-up world from just a fad in the early days, to being a serious business worth billions of dollars in India and across the globe. A former top Google executive who later became the right-hand man for start-up funding poster-boy Masayoshi Son of Softbank, the Indian-American Arora is now the CEO and chairman at Palo Alto Networks, a cyber security provider.
Speaking at the Times Network India Economic Conclave, the US-based Arora – who has been a driving force in the funding and scaling up of scores of successful start-ups – said that despite a shrinkage in money supply, he is not worried about the fund inflows into new ventures.
“The current economic scenario in the world where money supply is shrinking is causing a revaluation of start-ups. But I am not particularly worried. This will not impact long-term trajectories of India or the world,” he said.
Arora said that start-ups in India are not growing in scale and size, but are increasingly addressing the needs of the global markets. “What is fascinating is that I am beginning to see a class of start-ups which are global in nature. They are going for global markets, and I watch them get on the global stage and even on the Nasdaq. It is amazing. The time has come for them to see success not only in India but also outside.”
Asked whether the cash-burn model of many start-ups is sustainable and healthy business practice, he said, “Maybe, I’m old fashioned. At the end, you have to build a credible, robust long-term business. And credible, long-term, robust businesses are built on creating profitability and cash, because that’s what we value as investors.”
He said that “risks are beginning to rise”, and the cost of capital is going to go up. “And the people who have built businesses are going to see long-term profitability and long-term growth. I think people who have been sort of funded on promise are going to have to take a bit of a breather… and think about the long-term value of their businesses.”
Asked about the shortage of talent in the IT sector and whether cost of trained manpower is going up in India, Arora said that wage inflation is a consequence of growth in digital that the world is witnessing. “We are seeing the need for tech talent. That will not go away… You will see a continued demand over the next few decades. This demand will only grow as we see development in areas such as AI, Bitcoin, crypto, and cyber security. India is young and highly-skilled. So, wages will be robust.”
He said that to have trillion-dollar market-cap companies in India – such as Google and Meta in the US – Indian companies will need to go global.
On increasing cyber-attacks, he said that as digital engagement grows across services and around the world, the world remains at risk. “We are relying more on tech. We are opening more and more doors of data. Those doors can be used by bad actors. Cyber warfare is the next front as people do not want to engage in physical warfare.”

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